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March 18, 2018

Kenya's Eurobond oversubscribed seven folds to defy Moody's negative sentiments

Finance cabinet secretary Henry Rotich at State house  where he announced that the government had successfully launched a $2 billion eurobond June 25 2014./HEZRON NJOROGE
Finance cabinet secretary Henry Rotich at State house where he announced that the government had successfully launched a $2 billion eurobond June 25 2014./HEZRON NJOROGE

Kenya's $2 billion (Sh200 billion ) dollar denominated bonds of 10-year and 30-year bonds issued on Wednesday were oversubscribed seven fold to attract $14 billion (Sh1.4 trillion), affirming investors confidence in the country

Treasury CS Henry Rotich yesterday said that the funds will be applied towards developing initiatives and liability management. The amount will also be invested in infrastructure

The success of the two bonds is in total defiance to Moody's recent ratings which downgraded the country's long-term foreign currency bond ceiling to Ba3 from Ba2 and the long-term foreign currency deposit ceiling to B3 from B2 citing pressure from the country’s rising debt levels and its weak financial muscle to service existing ones.

''The fact that we got $14 billion in investor appetite reflected the continued support the country receives. We now have a dollar yield curve stretching out to 30 year, making Kenya one of a handful of governments in Africa to achieve this,'' Treasury statement read in part

The maturity of the two Eurobond issues are 10-years and 30-years and the initial pricing guidance is 7.625 and 8.625 percent respectively. However, the coupon on the existing 10-year is at 6.875 percent and as such, the initial pricing on the 10-year has factored a risk premium that has been triggered by recent debt level concerns that led to Moody’s downgrade.

The new bonds have now pushed the country's debt to almost Sh4.9 trillion considering that the state has already floated three domestic bonds worth Sh80 billion since the beginning of this year. In November, Kenya's public debt was at Sh4.6 trillion

The latter syndicated loan was arranged by Citi, Standard Bank and Standard Chartered who in addition to JP Morgan are also the book runners of the current Eurobond which was floated in 2014

The twin international sovereign bond issues will be listed on London and Irish Stock Exchanges

'This follows a successful roadshow conducted with investors, covering a wide geography and has resulted in a significant level of interest expressed in the issue,'' Treasury said

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